On July 27, 2022, the fed raised interest rates again, bringing rates to between 2.25% to 2.5%.
Does this mean a recession is coming or are we already in one? Who knows? Every financial pundit has a different opinion. Either way, both inflation and recession create nail-biting fortuity.
What Does a Recession Mean for Me?
If you hold a student loan or home loan, the recession news is less positive than it is for those with enough money in a savings account to keep afloat or who are living off a high-yield savings account.
But whether higher interest rates work for or against you; whether we’re in a recession or not, there are some things you can do to ride out a recession with your financial boat intact.
Financial Advice for Riding Out an Economic Downturn
Take stock of your current financial situation. Winnie Sun, Managing Partner, Sun Group Wealth Partners advises to take a look at your retirement assets, savings, and checking accounts to see where your assets lie.
Audit your budget to see where you’re spending and where you’re earning. This will help you determine if you need a budget or not.
Start with the bare bones to get a baseline. First the priorities. What are you spending on housing, food, utilities and medical expenses? After that, look at what you’re spending on car payments and nice-to-have’s like streaming services.
Consider whatever is left is discretionary income.
Be a Budget Planner. Make budgeting a family affair so everyone agrees on your financial management plan. It’s good for your marriage and provides instructive money role modeling for your kids.
Tip: Use a membership card that offers a percentage-off gas deal. Some rewards programs offer cash-back incentives.
Diversify your investments. Stocks tend to fall during a recession, which can be a good thing or a bad thing.
If you prefer to stay in the stock market, buy from companies you know will come out strong as the recession wanes.
If the stock market’s fluctuations make you nervous, consider buying bonds like government-guaranteed savings bonds or investing in foreign securities and precious metals.
If you have a recession-proof job, take this time to pour as much into your savings as possible.
You can also invest in your family’s financial future with a level term life insurance policy. Term rates are locked in without the fluctuations interest-earning policies suffer. It’s much less expensive and payouts are completely tax-free.
Pay down or pay off credit card debt. And throw away new credit card offers—unless you can transfer current credit card debt to a card with a lower interest rate if you can find one.
Avoid new loans and consider refinancing any variable rate loans to fixed-rate loans. Look into doing the same for your student loans, too.
Invest in yourself. Consider ways you can generate outside income with a part-time job or an online business.
Reach out for help if you need to. Call companies and utilities to whom you owe money and explain your situation. A lot of times, they’ll give you a break.
Look for ways to have fun. Even in a recession, there are still simple ways to have fun and grow stronger bonds with your family. Play the games or do the puzzles you never had time for, go on a day trip to a free museum, or have a picnic. Ask your kids for other ideas.
No doubt economic downturns are white-knuckle events. But as you ride out the storm, take time to breathe and appreciate the little moments that make you smile. And stop doomsday scrolling. It’s going to be fine. This isn’t our first rodeo.